Australia: Life insurance distributor transfers its policy administration business to reinsurer

Freedom Insurance Group (FIG) has executed a transition agreement to transfer its policy administration business to Swiss Re Life & Health Australia for a net settlement consideration of A$5m ($3.5m), according to an Australian Securities Exchange (ASX) statement.

According to various news reports, after being heavily scrutinised by the regulator during the Hayne royal commission, the ASX-listed insurer had suffered millions in losses and plunging share prices. The agreement is said to provide certainty to FIG’s policyholders and staff and positions the company to deliver a return to its shareholders.

FIG announced that it would transition its policy administration services to another service provider for a payment amount that reflects the value of net trail commissions after offsetting commission clawbacks, expected administration costs and an allowance for remediation of customers who may have suffered financial harm in line with the customer remediation programme announced on 6 December 2018.

Comprising the Freedom Insurance and Spectrum Wealth Management brands, FIG intends to exit Spectrum post completion of the transfer of its policy administration services.

Freedom used to offer a range of insurance solutions direct to consumers through its call centre until September last year. It is currently not distributing new products but continues to service existing customers. Meanwhile, Spectrum offers more complex insurance solutions with a range of fully underwritten products which are offered through financial advisers.

Under the transition agreement, the following actions will be carried out:

  • Insurer parties (NobleOak Life, AIA Australia and Swiss Re) will terminate Freedom’s product development and distribution as well as it policy administration agreements
  • Freedom will transition its policy administration services to Genus Life Insurance Services
  • Swiss Re has agreed to assume responsibility for designing and managing Freedom's customer remediation programme together with an external consultant
  • Freedom will no longer receive any future trail commissions and other revenue from NobleOak, AIA Australia or Swiss Re nor will it be required to make commission clawback payments to Swiss Re

Proceeds received from the transition agreement will be used to pay creditors, wind down the company’s remaining operations and meet any final outstanding regulatory obligations. FIG’s board intends to return excess funds to shareholders. Freedom expects to release its half year accounts to 31 December 2018 before 30 June 2019.

While it prepares to divest its businesses, FIG has appointed Mr Doug Halley and Mr James Green as non-executive directors who have been working very closely with the board and senior management team for the last two months. At the same time, non-executive directors Mr Stephen Menzies and Mr Andrew Jensen have retired from Freedom’s board.

 

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